World Summary of International Transactions, 1961-66
Author:
John S. Smith
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Publication Date:
01 Jan 1969
eISBN:
9781451956245
Language:
English
Keywords:
SP; budget; government; merchandise trade; balance of payments statement; net asymmetry; capital transactions; monetary gold; Gold reserves; Foreign direct investment; Gold; Trade in goods; Capital flows; Global
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From the Foreword to the first issue: “Among the responsibilities of the International Monetary Fund, as set forth in the Articles of Agreement, is the obligation to ‘act as a center for the collection and exchange of information on monetary and financial problems,’ and thereby to facilitate ‘the preparation of studies designed to assist members in developing policies which further the purposes of the Fund.’ The publications of the Fund are one way in which this responsibility is discharged. “Through the publication of Staff Papers, the Fund is making available some of the work of members of its staff. The Fund believes that these papers will be found helpful by government officials, by professional economists, and by others concerned with monetary and financial problems. Much of what is now presented is quite provisional. On some international monetary problems, final and definitive views are scarcely to be expected in the near future, and several alternative, or even conflicting, approaches may profitably be explored. The views presented in these papers are not, therefore, to be interpreted as necessarily indicating the position of the Executive Board or of the officials of the Fund.” The authors of the papers in this issue have received considerable assistance from their colleagues on the staff of the Fund. This general statement of indebtedness may be accepted in place of a detailed list of acknowledgments. Subscription: US$6.00 a volume or the approximate equivalent in the currencies of most countries. Three numbers constitute a volume. Single copies may be purchased at $2.50. Special rate to university libraries, faculty members, and students: $3.00 a volume; $1.00 a single copy. Subscriptions and orders should be sent to: THE SECRETARY International Monetary Fund 19th and H Streets, N.W. Washington, D. C. 20431

Abstract

From the Foreword to the first issue: “Among the responsibilities of the International Monetary Fund, as set forth in the Articles of Agreement, is the obligation to ‘act as a center for the collection and exchange of information on monetary and financial problems,’ and thereby to facilitate ‘the preparation of studies designed to assist members in developing policies which further the purposes of the Fund.’ The publications of the Fund are one way in which this responsibility is discharged. “Through the publication of Staff Papers, the Fund is making available some of the work of members of its staff. The Fund believes that these papers will be found helpful by government officials, by professional economists, and by others concerned with monetary and financial problems. Much of what is now presented is quite provisional. On some international monetary problems, final and definitive views are scarcely to be expected in the near future, and several alternative, or even conflicting, approaches may profitably be explored. The views presented in these papers are not, therefore, to be interpreted as necessarily indicating the position of the Executive Board or of the officials of the Fund.” The authors of the papers in this issue have received considerable assistance from their colleagues on the staff of the Fund. This general statement of indebtedness may be accepted in place of a detailed list of acknowledgments. Subscription: US$6.00 a volume or the approximate equivalent in the currencies of most countries. Three numbers constitute a volume. Single copies may be purchased at $2.50. Special rate to university libraries, faculty members, and students: $3.00 a volume; $1.00 a single copy. Subscriptions and orders should be sent to: THE SECRETARY International Monetary Fund 19th and H Streets, N.W. Washington, D. C. 20431

A global aggregation of balance of payments statistics serves to shed light both on the reliability and international comparability of the reported statements and on the structure of world payments. Some observations on the first of these aspects are contained in a previous study,1 and the additional statistics now available suggest no important modifications to them. On the other hand, certain facts about the world payments structure appear to be showing up more clearly and to be receiving confirmation as the series of data that has been compiled is extended to cover more years. This paper draws attention to some of these structural features. The statistical discrepancies revealed by the “world summary” approach, together with the conclusion based on supplementary exercises in disaggregation and direct intercountry comparisons that the summaries tend to mask substantial compensating errors, make it unwise to read too much into what may seem to be slight tendencies over the period. Nevertheless, the evidence on at least a few points seems quite unmistakable, and these points are discussed below.

(1) The gross volume of international transactions in goods and services grew noticeably faster from 1961 to 1966 than the volume of domestic transactions, as measured by such indicators as gross national product. Goods and services separately rose at rather similar rates.

(2) For many categories of capital transaction, the gross volume of turnover is not of much analytic interest, and the balance of payments does not seek to record capital movements on a fully gross basis. However, the net flows, country by country, of the main types of capital distinguished in the balance of payments increased considerably in the period 1961–66, although this increase was probably not more than about two thirds as large, on the average, as the growth in gross transactions in goods and services.

(3) The gross volume of transactions among developed countries appears to be at least three or four times as large as the transactions of these countries with the less developed countries. On the other hand, such evidence as is available indicates that transactions among less developed countries could hardly amount to as much as one fourth of their total transactions, and it is possible that the proportion was actually much smaller than this.

(4) The similarities between the broad structure of the transactions of the developed countries with each other and of their transactions with the less developed countries are more striking than the differences. Moreover, this structure remained virtually unchanged from the beginning to the end of the period. The only notable difference in pattern between the transactions of the two groups is that, as might be expected, service receipts play a smaller role, and transfer payments and capital inflows a larger one, among the credit entries for the less developed than for the developed countries. (See Part 1 of Table 4.)

(5) The available data do not suggest that there was any great disparity between the rate of growth of transactions among developed countries and their transactions with less developed countries. In fact, Part 2 of Table 4 by chance shows identical percentage increases for both groups over the five-year period.

(6) For goods, services, and transfer payments, the large increase in gross flows over the period was not accompanied by any indication of an increase in net deficit of the less developed countries with the developed countries on these categories of transaction. For capital transactions other than monetary movements, the net flow from the developed to the less developed countries increased substantially from the beginning to the end of the period. During the latter part of the period, the net capital flow came to exceed the current account imbalance, so that less developed countries were able to add to their reserves.

I. Magnitude of International Transactions

Although the statistics for world aggregates of basic economic series are far from precise, international transactions undoubtedly increased at a much faster rate than most kinds of domestic activity during the period surveyed. (See Table 1.) The following tabulation compares the increase from 1961 to 1966 in intercountry transactions, based on the figures in this paper, and in various categories of domestic activity, as derived from the United Nations’ Statistical Yearbook; all figures exclude the CMEA countries, mainland China, etc., and are expressed as percentage increases.

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This comparison overstates the growth in international receipts relative to the other factors, since the former are not deflated for price increases. However, the UN index of export prices suggests that the prices for merchandise trade, which accounts for some 60 per cent of international transactions, rose by only about 5 per cent from 1961 to 1966.

The increase in international payments proceeded rather evenly from year to year within the period, as the following figures show:

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Only the increase in the first year, from 1961 to 1962, is notably different from the pattern of the rest of the period. The closely parallel development in the two groups of countries leading to identical increases of 54 per cent over the five years is also interesting, although the underlying reasons for it are not ascertainable from the available data. The great majority of transactions of the developed countries (probably at least 75 or 80 per cent) are with other developed countries, while a similar proportion of those of the less developed countries are with the developed countries. From this it might be inferred either that both groups have been equally responsive to certain underlying influences affecting the world economy or that the developed countries set the pace but the effect of their actions has tended to be spread rather evenly over their partners in both groups.

A breakdown of the over-all increase in international transactions by balance of payments category and country group is given in Table 4, Part 2. Because of the deficiencies in the reported data, small differences in the percentages cannot be regarded as significant. The breakdown of the transactions of the developed countries between those with other developed countries and those with less developed countries is especially crude, since the estimating method used (see Note to Table 4) assumes in effect no change in the pattern of the transactions of the less developed countries with each other. The trade statistics show that about 25 per cent of the merchandise transactions of the less developed countries in 1961 were with other less developed countries, and that this trade had increased by some 35 per cent (much more slowly than trade with the developed countries) by 1966. If the figures were to be adjusted for trade among less developed countries, the increases under the merchandise column in Part 2 of Table 4 would be reduced at most by only 1 or 2 percentage points for trade between developed countries and raised by the same proportion for trade of the developed with the less developed countries. The differences between the rates of increase in trade between the various groups may thus have been, if anything, slightly less than the table indicates. The conclusions to be drawn from the figures are that merchandise trade of developed countries among themselves and their imports from the less developed countries grew at about the same rate; the exports of developed to less developed countries increased a little more slowly; and the trade of the less developed countries among themselves showed the smallest rise of all.

Table 1.

Summary of Reported Balance of Payments Statements, 1961-661

(In billions of U.S. dollars)

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See footnote 1 to Table 4 for description of coverage and area classification.

Service transactions on the whole expanded at about the same pace as merchandise transactions, although the flows among the different country groups showed greater diversity. It seems clear that the greatest increase occurred in the transactions between the developed and less developed countries, especially in the receipts of the less developed group. From the detailed table on services (see Table 2), it may be seen that this relatively faster growth rate was widespread among most individual categories of services.

Table 2.

Reported International Transactions in Services, by Category, 1961-661

(In millions of U.S. dollars)

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See footnote 1 to Table 4 for description of coverage and area classification. An analysis by country for 1962-66 of each of the individual items in this table is available in typescript on application to the Balance of Payments Division, International Monetary Fund, 19th and H Streets, N.W., Washington, D.C. 20431 U.S.A.

Credit entries represent total earnings of carriers that are residents of the reporting countries. Debit entries represent the total import freight bill of the reporting countries. The net entries are thus consistent in concept with an f.o.b. valuation of merchandise.

The differing rates of increase in various types of transfer payments and capital are difficult to assess, both because the absolute magnitudes of these flows are rather small, which tends to lend emphasis to quantitatively minor variations in them, and because asymmetries and errors have been found to be large relative to the size of the recorded transactions. (See Table 3.) About the most that can be inferred from the percentage increases for these categories shown in Part 2 of Table 4 is that their average growth during the period was somewhat slower than that in goods and services. Very few of the increases shown, especially for those flows of transfer payments and capital that are significant in absolute amount, are as high as the general range indicated for goods and services.

Table 3.

Reported Capital Flows, Excludino Monetary Gold, 1961-661

(In millions of U.S. dollars)

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See footnote 1 to Table 4 for description of coverage and area classification. An analysis by country for 1962-66 of each of the individual items in this table is available in typescript on application to the Balance of Payments Division, International Monetary Fund, 19th and H Streets, N.W., Washington, D.C. 20431 U.S.A.

The entries in this column for “all reporting countries” do not necessarily indicate errors and omissions, except for the grand total. Other items are asymmetrically classified by definition, each country reporting the sector of the domestic creditor or debtor.

II. Balance of Payments Structure

The differences in growth rate for various categories of transaction between 1961 and 1966 were not large enough to produce any striking change in the general pattern of the balance of payments (see Table 4, Part 3). In both years, merchandise trade comprised about three fifths of all international transactions, services close to one fourth, and transfer payments and capital movements the remaining 15 per cent. The faster growth of the current items increased their proportionate share in the total by perhaps 5 per cent (3 percentage points) over the period. While a shift of this magnitude can hardly be seen as an important structural alteration, a continuation of such a tendency over a longer period would result in a noticeably different pattern of world transactions. However, there is no basis for predicting whether this tendency is likely to be a persistent one.

Merchandise trade dominates the international transactions of both the developed and the less developed countries, its relative importance being rather similar for the two groups. However, as mentioned above, Part 3 of Table 4 has been constructed as if all transactions of the less developed countries took place with the developed countries. If an adjustment were made for trade among the less developed countries, the ratios for merchandise trade among the developed countries would be raised in each instance by 1 or 2 percentage points, while those for trade of the developed with the less developed countries would be decreased by as much as 4-6 percentage points. After such an adjustment, it would appear that merchandise trade was somewhat more important, relative to total transactions, in the transactions of the developed countries among themselves than in their transactions with the less developed countries. However, to make such an adjustment for merchandise alone, without similarly allowing for other types of transactions by the less developed countries among themselves, runs the risk of overstating the difference in pattern, or even of creating the appearance of such a difference where none in fact exists.

Table 4.

Structure of Reported International Transactions, by Category and by Country Group, 1961 AND 19661

Part 1. Gross Value of Transactions

(In millions of U.S. dollars)

Table 4.

Structure of Reported International Transactions, by Category and by Country Group, 1961 AND 19661

Part 2. Increase in Value, 1961-66

(In per cent)

TABLE 4.

Structure of Reported International Transactions, by Category and by Country Group, 1961 AND 19661

Part 3. Ratio of Each Category to Total

(In per cent)

NOTE. Errors and asymmetries in the reported figures, as shown for example in Table 5, are not as important in interpreting gross flows as they are when net balances are being considered. Nevertheless, they are not always negligible relative to the gross transactions, as may be seen by comparing the total recorded receipts and payments in each category (Part 1 of this table). In addition, the method used to divide the transactions of developed countries between those with other developed countries and those with less developed countries might well give rise to substantial errors in that breakdown; it has simply been assumed that the transactions reported by the less developed countries were entirely with the developed countries, and that these identical amounts are included in the figures reported by the developed countries. For these reasons, the percentage increases and ratios derived in Parts 2 and 3, respectively, of this table can be regarded as no more than rough orders of magnitude, and changes and differences in the figures are not likely to have any real significance unless they are substantial and persistent.

The figures cover the transactions of 87 countries and country groups for which statements are published in the Fund’s Balance of Payments Yearbook, Volume 19. Balance of payments statements are available for all those countries classified as developed. Merchandise exports of countries not reporting (other than CMEA countries, mainland China, etc.) are estimated roughly to have been some $5 billion for 1966. Transactions of international organizations and certain international companies are also omitted. The division between developed and less developed countries agrees with the table on world trade in the Fund’s International Financial Statistics.

Including nonmonetary gold.
Table 5.

Net Balances, Adjustments, and Asymmetries in World Balance of Payments Summary, 1961-661

(In millions of U.S. dollars)

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See footnote 1 to Table 4 for description of coverage and area classification. For “developed countries” and “less developed countries,” the balances are derived from the reported figures, with a few adjustments for known asymmetries that could be allocated between the two groups “Rest of world” covers mainly transactions of international organizations, whose counterparts are presumably included in country reports. Identified asymmetries that cannot be allocated among the foregoing three groups are shown separately. Unidentified asymmetries are the remaining amounts required to bring the categories (except the gold items) to their theoretically correct total of zero for the world as a whole.

Receipts from service transactions are clearly a more important component of total receipts for the developed than for the less developed countries. On the other hand, service payments by the less developed countries form about the same proportion of their total payments as they do for the developed countries. This broad category conceals substantial differences in the types of services purchased by the two groups. For the less developed countries, investment income payments, particularly on direct investment, are much the most important single type; for the developed countries, travel and “other transportation” (mainly port expenditure and passenger fares) are relatively much larger.

Receipts and payments for transfer payments and nonmonetary sector capital form quite a small part of total international transactions. Nevertheless, the disparity between the size of the receipts and the payments for the two country groupings separately is an important structural feature, particularly in the less developed countries’ balance of payments. These flows could be seen as making up for the less developed countries’ low receipts from services, compared with the developed countries. The substantial asymmetries and errors found in the recorded figures for transfer payments make it difficult to know how much significance should be attached to the relative decline in importance of this category of receipts in the statements of the less developed countries. The almost complete stability shown by the ratios for nonmonetary capital, on the other hand, strongly suggests that these flows were maintained without major change over the period. For example, outflows for direct investment, trade credits, and official loans to the less developed countries did not accelerate faster than goods and services transactions, but neither were such outflows increasingly offset by capital flight from the less developed countries or by repayments falling due on earlier loans and credits.

III. Net Balances Between the Developed and Less Developed Countries

For the world as a whole, the net balance should, in principle, be nil for each category of transaction that is symmetrically defined—the goods and services items (except nonmonetary gold) individually, private and official transfer payments together, and capital (except monetary gold) in the aggregate. The global aggregates of reported figures, however, invariably show values different from zero, which reflect the net asymmetries and errors in the statistics. These errors in the global figures often approach in size the net balances reported by the developed and less developed countries taken as separate groups, which, in principle, should represent each group’s net balance with the other. Analysis of net flows between areas and of changes in these flows over time is thus subject to considerable uncertainty, although this problem may tend to become less serious as the time period covered by the available series lengthens, revealing more clearly certain patterns in the asymmetries. It is interesting, for example, that the large increase in the gross volume of transactions has not been accompanied by any evident increase in the size or the year-to-year variability of the net errors for most broad categories.

Some sources of asymmetry can be quantified, particularly transactions between reporting countries and international institutions. Moreover, the conceptually correct entries for the gold items can be derived from supplementary data and substituted for the reported figures. Most adjustments of this kind cannot be allocated by country or country group, however. An adjusted world summary, showing a few main net balances as reported, together with any known adjustments applying to them, is presented in Table 5.

Judging by the figures recorded by the less developed countries, the net flow of real resources (goods and services) to them from the developed countries remained at approximately the same level throughout the period, with annual variations that were quite small considering the magnitudes of the gross two-way flows. The net inflow, excluding the offsetting transfer payments that are included in this group in Table 5, was of the order of $5 billion a year. This figure is roughly substantiated by estimates that can be based on supplementary data reported by the developed countries, which indicate that the net flow might, if anything, have been a little larger than this amount.

Net capital flows of the nonmonetary sectors present a mildly conflicting picture, depending on whether the statistics of the developed or less developed countries are considered. The developed countries record a marked upward trend in flows to the less developed group over the whole period, sharply interrupted, however, by a drop in 1963. As shown in the statistics of the less developed countries, the whole change in the level of the inflows occurred in the middle of the period, and the last two years produced no further expansion. However, the levels at the beginning and at the end of the period are very similar in both sets of figures, if it is assumed (as seems by no means unlikely) that the identified asymmetries can be attributed mainly to the developed countries; it must also be observed that the same assumption would substantially increase the already large disparity for most other years. Whatever its exact timing, the rising inflow of nonmonetary capital into the less developed countries, together with the rather constant level of the aggregate deficit on current account of these countries, seems to have produced quite substantial over-all surpluses during 1963-66.

Récapitulation mondiale des transactions internationales, 1961-66

Résumé

L’établissement de totaux mondiaux à partir des statistiques de balance des paiements fournies par la plupart des pays dont les échanges commerciaux sont importants répond à deux objectifs. En premier lieu, il constitue une vérification de la concordance interne des chiffres, car en principe des montants égaux devraient être déclarés par les deux parties à chaque transaction. Cette récapitulation montre que les données actuellement disponibles manifestent des divergences importantes, dont la signification doit être évaluée à la lumière des objectifs analytiques auxquels I’information obtenue est destinée. En second lieu, l’étabiissement de totaux par groupes de pays et par catégories distinctes de transactions fournit des renseignements sur la structure des paiements mondiaux qui présentent de l’intérêt, par exemple, dans le cadre du processus d’ajustement. Les variations de structure dans le temps, qui apparaissent lorsque les chiffres globaux sont établis pendant plusieurs années consécutives, constituent un aspect connexe qui mérite d’être étudié.

Malgré leurs défauts, les statistiques soumises semblent être tout à fait suffisantes pour permettre de formuler quelques généralisations sur la structure des paiements mondiaux pendant les années 1961-66. A titre d’exemple, le volume brut des transactions internationales en biens et services semble avoir augmenté bien plus rapidement au cours de cette periode que le volume des transactions intérieures; il pourrait bien, en outre, avoir augmenté plus rapidement que les mouvements internationaux de capitaux. Par ailleurs, les similitudes entre pays dévéloppes et pays moins dévéloppes, en ce qui concerne à la fois la structure des transactions et le taux de croissance, sont plus frappantes que les différences, bien que celles-ci existent naturellement aussi. Cet article présente et commente les éléments statistiques disponibles qui servent de base aux observations de cette nature.

Resumen mundial de las transacciones internacionales, 1961-66

Resumen

La consolidatión de las estadísticas mundiales de balanza de pagos que publican la mayoría de los países comerciales importantes llena dos própdsitos. En primer lugar sirve para verificar la concordancia interna de las cifras, puesto que en principio si dos países participan en una transactión ambos deben presentar cantidades iguales respecto a la misma. Mediante este procedimiento se demuestra que los datos de que ahora se dispone muestran considerables discrepancias, cuyo significado debe evaluarse a la luz de los fines analiíticos para los que ha de usarse la información. En segundo lugar, la presentación de los datos en forma resumida, clasificados por grupos de países y por clases de transacciones, proporciona información sobre la estructura de los pagos mundiales, lo cual reviste interés en lo que se refiere, digamos, al proceso de ajuste. Los cambios de estructura que ocurren con el correr del tiempo y que pueden observarse cuando se efectúan consolidaciones que abarcan varios años, constituyen un aspecto conexo digno de estudio.

Pese a sus deficiencias, las estadísticas enviadas al FMI parecen ser completamente adecuadas para respaldar unas cuantas generalizaciones acerca de la estructura que presentaron los pagos mundiales durante el período comprendido entre 1961 y 1966. Por ejemplo, durante dicho periodo el volumen bruto de las transacciones internacionales en bienes y servicios parece haber aumentado con mucha mayor rapidez que el de las transacciones internas, y también es posible que haya crecido a un ritmo más acelerado que las corrientes internacionales de capital. Además, las semejanzas entre los países desarrollados y los menos desarrollados, tanto en lo que se refiere a la estructura de sus transacciones como a su tasa de crecimiento, son más sorprendentes que las diferencias que presentan, aunque, por supuesto, siempre existen diferencias entre ellos. En este trabajo se presenta y comenta la información estadística con que se cuenta y que sirve de base para tales observaciones.

*

Mr. Smith, Assistant Director in charge of the Balance of Payments Division, Research Department, is a graduate of Amherst College and did further work at Harvard Graduate School. Before coming to the Fund, he was with the U.S. Government, specializing in balance of payments problems.

1

John S. Smith, “Asymmetries and Errors in Reported Balance of Payments Statistics,” Staff Papers, Vol. XIV (1967), pp. 211-36.

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Cover IMF Staff Papers
IMF Staff papers: Volume 16 No. 1
Author:
International Monetary Fund. Research Dept.
Volume/Issue:
Volume 1969: Issue 001
Publisher:
International Monetary Fund
ISBN:
9781451956245
ISSN:
1020-7635
Pages:
194
DOI:
https://doi.org/10.5089/9781451956245.024